procter-and-gamble-business-model

P&G Business Model Analysis

P&G has a portfolio of brands that resonate with consumers spanning five main units and it focuses on their growth, while also innovating by the creation of new products. P&G generated over $80 billion across these brands. Its strength stands by implementing a growth strategy focused on five pillars: portfolio, superiority, productivity, constructive disruption and organizational design.

Quick glance at P&G Business Model

To understand P&G business model, its critical to grasp the fact it moves in two opposite directions:

  • On the one hand it focuses on the growth and success of existing brands and products which have become successful categories in the minds’ of consumers.
  • On the other hand, it focuses on innovating, by creating new products, brands, and focusing on making them into new categories

From this combination, P&G business model evolves.

Revenue Model

p&g-revenue-model
Source: P&G

The company operates five divisions which it calls sector business units (SBUs):

  1. Baby, Feminine & Family Care.
  2. Beauty.
  3. Health Care.
  4. Grooming, and
  5. Fabric & Home Care.

This year Procter & Gamble generated over $80 billion in revenues and almost $18 billion in operating income through five operating units:

  • Fabric & home care: $27.5 billion
  • Feminine and family care: $19.7 billion
  • Beauty: $14.7 billion
  • Health care: $10.8 billion
  • Grooming: $6.5 billion.

P&G today is worth $340 billions.

Finance.

P&G Growth Strategy

p&g-growth-pillars
Source: P&G

It comprises a huge portfolio of consumer products acquired via an integrated growth strategy comprising five pillars :

  • Portfolio: performance drives brand choice.
  • Superiority to win with consumers.
  • Productivity to fuel investments.
  • Constructive disruption across its business.
  • Organization: empowered, agile, accountable.

Portfolio

procter and gamble brands
Source: P&G

How does Procter & Gamble selects its portfolio of products?

It looks for “what’s needed?” and “what’s possible” and it combines that to build its products’ portfolio:

pandg-brands-portfolio

Superiority

p&g-superiority-strategy
Source: P&G

How does P&G measure superiority?

Through five elements:

  • Products that needs to be so good to be differentiated in the minds of consumers.
  • Packaging that needs to attract consumers, convey brand equity (demand generation via packaging).
  • Brand communication that amplifies product and packaging through advertising that is meant to make consumers think, talk, laugh, cry, smile, act and buy (advertising serves to amplify the brand to create a differentiated category in consumers’ minds).
  • Retail execution via store coverage, product forms, sizes, prices points, shelving and merchandising. While the online is driven by content, assortment, reviews, search and subscription revenues.
  • Consumer & customer value presented in a clear and shoppable way at a compelling price.

A Constructive Disruption Mindset

constructive-disruption
A consumer brand company like Procter & Gamble (P&G) defines “Constructive Disruption” as: a willingness to change, adapt, and create new trends and technologies that will shape our industry for the future. According to P&G, it moves around four pillars: lean innovation, brand building, supply chain, and digitalization & data analytics.

A willingness to change, adapt and create new trends and technologies that will shape our industry for the future.

constructive-disruption

Dawn Powerwash Dish Spray Case Study

Dawn Powerwash Dish Spray as an example of constructive innovation, where P&G addresses changing consumer needs with a lean innovation approach, combined with data about these changing needs, translated into the products.

One example that P&G mentions is the Dawn Powerwash Dish Spray addressed a changing consumer need.

As consumers look for products that help them clean dishes as they go (instead of waiting until the end of the meal), this product enables direct application, which enables consumers to clean as they go, speeding up the process, and saving also water.

Pampers Rewards app Case Study

Another example, that P&G mentions as constructive disruption is Pampers Rewards app, which helps parents receive helpful information.

Here the challenge is to reach parents, at different stages of their journey, through smart audiences built over the app in order to enable these parents to find useful information.

Smart audiences help P&G reach a niche audience, like that of parents at various stages of growth of the baby (newborn, crawling, potty training), so that they can also receive very targeted advertising.

P&G Organizational Structure

Procter & Gamble’s organizational structure moves along a few key pillars.

The whole organizational structure is designed to enable speed and focus, while also managing challenges and headwinds as consumer needs change.

The three pillars are:

p&g-organizational-structures

The organizational structure of Procter & Gamble is predominantly product-type divisional. This means decision-making, strategy, and management are determined by product-based divisions headed by autonomous CEOs. 

The company has six divisions, with each headed by a President:

  1. North America.
  2. Europe.
  3. Asia Pacific.
  4. Greater China.
  5. India, Middle East and Africa (IMEA).
  6. Latin America.

Various Presidents and Chief Officers head functional groups related to:

  • Research, Development and Innovation.
  • Human Resources. 
  • Equality & Inclusion.
  • Product Supply.
  • Ethics & Compliance.
  • Analytics & Insight.
  • Global Walmart. 
  • Branding.
  • Legal and Secretariat. 
  • Sustainability. 
  • Communications.
  • Finance.

Various Presidents and Chief Officers head functional groups related to:

  • Research, Development and Innovation.
  • Human Resources. 
  • Equality & Inclusion.
  • Product Supply.
  • Ethics & Compliance.
  • Analytics & Insight.
  • Global Walmart. 
  • Branding.
  • Legal and Secretariat. 
  • Sustainability. 
  • Communications.

P&G Key Growth Driver? Its Acquisition Strategy!

P&G sweet spot stands in the ability to acquire products, and further enhance their distribution, by enhancing the supply chain (availability of that product) and its demand generation (via ad hoc branding campaign, both off and online).

Thus, P&G finds brands that are compelling for consumers and it further scales them up through a distribution playbook that it has built over the decades.

For the same token, P&G also moves quickly in divestitures of brands and products that might not resonate anymore with its business strategy.

Read Next: P&G Brands And Products, Constructive Innovation, P&G Organizational Structure.

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